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Report: 700,000 U.S. Homeowners Regain More Equity

There’s good news on the horizon for homeowners and the national economy this financial quarter: More than 700,000 U.S. households regained positive equity in their properties, according to a new report.

This change, reported by CoreLogic, a provider of business information and analysis, is significant for the overall economy as it ultimately may have a positive impact on the housing market as well as decrease future mortgage default risk.

New data released in July indicated a decrease in residential properties considered “underwater” or “upside down” for the second quarter.

At the end of the first quarter, 11.4 million mortgaged residential properties — nearly 24 percent of them — were in negative equity, meaning the borrower owed more than the house was worth, according to the report.

The report was based on 48 million properties with a mortgage which accounts for more than 85 percent of all mortgages.

Near-Negative Equity Homes Also Affected

When properties designated “near-negative equity” were included, 28.5 percent of homes were affected in the first quarter. “Near-negative equity” means homeowners that had less than 5 percent equity in a property.

This is a substantial decrease from data from the fourth quarter of 2011 when negative or near-negative equity mortgages reached 30.1 percent.

Monetarily, the decrease caused a reduction of negative equity from $742 billion in the last quarter of 2011 to $691 billion in the first quarter of 2012.

This $51 billion difference is greatly attributed by economists to the change in housing prices. While economic recovery may seem slow at times, the substantial change between quarters is positive for mortgage holders, banks and homeowners needing to sell properties.

According to the data, 1.9 million mortgage holders were merely 5 percent under in equity in the first quarter of 2012, which implies a slight increase in future housing prices could significantly change their home value and ultimately their financial situation.

5 States Hold 44-Percent Negative Equity

The change may make a major difference to people living in the states most affected by the rapid decrease in housing values over the years, such as Nevada, which has the highest number of loans considered underwater at 61 percent. Florida and Arizona follow close behind with 45 percent and 43 percent.

About 37 percent of homes in Georgia and 35 percent in Michigan were also considered underwater. It’s vital to note statistically that these five states hold the highest amount of negative equity combined at 44.5 percent.

When combined, the remaining states have an average negative equity share just under 16 percent.

Additional data indicated 31 percent of homes with negative equity were valued under $200,000 with nearly 16 percent of homes valued at more than $200,000.

It’s also important to note that out of the 11.4 million borrowers considered upside-down in their homes, 6.9 million of them were properties with only first liens (without a home equity loan/second mortgage) with an average mortgage balance of $212,000. These properties were estimated to be nearly $50,000 under-water.

For those properties with first and second liens, the average outstanding mortgage balance was $299,000 with $82,000 in negative equity.

Economists are hopeful as more households regain positive equity in their properties the housing market will continue to stabilize along with the economy.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].

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    1. Inman News (2012). Rising home prices bring 700,000 homeowners above water. Retrieved from:
    2. CoreLogic online (2012). CoreLogic Reports Negative Equity Decreases in First Quarter of 2012. Retrieved from: